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Over three-quarters of institutional investors in the United States consider alternative investments “essential” to a diversified portfolio, a survey by Natixis Global Asset Management found. The survey, released Tuesday, found 74% of investors have changed their approach to risk management over the past five years.

Natixis surveyed 151 institutional investors based in the United States and found 64% believe traditional methods of diversifying portfolios need to be replaced. Seventy-two percent think the common 60/40 mix in portfolios is no longer an efficient way to achieve returns. Moreover, 68% of investors believe increasing their allocation to liquid alternatives or noncorrelated assets (64%) are effective ways to manage risk.

“Years of market instability have U.S. institutional investors on edge,” John Hailer, CEO of Natixis Global Asset Management in the Americas and Asia, said in a statement. “In their view, markets are driven more by economic and political events than by fundamentals. As a result, decisions are often made for defensive reasons.”

Among investors who have already invested in alternatives, 88% are happy with their performance.

For the most part, institutional investors are confident they are on target with their allocation to specific categories of alternatives. Over half said they were on target in their allocation to private equity and 65% said they were on target in venture capital. About one-quarter said they were above target on their allocation to single-manager hedge funds or funds of hedge funds, but most said they were on target in those categories. Sixty-two percent of investors said they were on target in global macro fund allocation and 64% said the same about commodities.

Financial problems in Europe are clearly on the top of institutional investors’ minds. Sixty-eight percent of respondents said financial problems in Europe will be one of the three most likely sources of market volatility over the next two years. Almost half said it’s one of the top three issues keeping them up at night.

Regulatory changes are another issue concerning investors. Eighty-five percent believe there will be more restrictions on financial institutions and investors no matter who wins the election. About three-quarters think limits will be strict enough to limit their market-making abilities and make them less competitive.

Natixis also surveyed institutional investors around the world and found that while U.S. investors are more likely to say alternatives are “necessary to beat market returns,” they are widely popular. Sixty-nine percent of all institutional investors surveyed said alternatives were an important way to diversify risk. Sixty-three percent said they were necessary to beat the market.

Natixis found that among global investors 24% would increase their allocation to alternative investments, compared with 93% of U.S. investors. While 12% of global investors would decrease their alternatives allocation, 7% of U.S. investors would do so.

Eighty percent of global investors believe volatility is a permanent characteristic of the market. The survey found limiting exposure to volatility is investors’ No. 1 priority over the next 12 months. Over half of investors are looking away from traditional assets because they’re “too highly correlated” to achieve good returns.

More than two-thirds of respondents agree new methods are needed to get the best returns. Compared with 72% of U.S. investors who think the 60/40 allocation mix is no longer valuable, 65% of global investors agree.

The European debt crisis is one of the top three issues keeping half of global investors up at night, the survey found. One-third cited regulatory changes and 31% said unexpected sources of risk are troubling their sleeping hours.